New Jersey Resources Corp (NJR) 2017 Q2 法說會逐字稿

Good day, and welcome to the New Jersey Resources Second Quarter Fiscal 2017 Earnings Conference Call.

(Operator Instructions) And please note, this event is being recorded.

I would now like to turn the conference over to Dennis Puma, Investor Relations.

Please go ahead.

Thank you, Ryan, and good morning, everyone.

Welcome to New Jersey Resources Second Quarter Fiscal 2017 Conference Call and Webcast.

I'm joined here today by Larry Downes, our Chairman and CEO; Pat Migliaccio, our Chief Financial Officer; as well as other members of our senior management team.

As you know, certain statements in today's call contain estimates and other forward-looking statements within the meaning of the securities laws.

We wish to caution listeners of this call that the current expectations, assumptions and beliefs forming the basis for our forward-looking statements include many factors that are beyond our ability to control or estimate precisely, which could cause our results to materially differ from our expectations, as found on Slide 2. These items can also be found in the Forward-looking Statements section of today's news release, furnished on Form 8-K, and in our most recent 10-Q and Form 10-K filed with the SEC, both can be found at sec.gov.

We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events.

Turning to Slide 3. We will be referring to certain non-GAAP measures, such as net financial earnings, or NFE.

We believe that NFE provides a more complete understanding of our financial performance.

However, it is not intended to be substitute for GAAP.

Our non-GAAP financial measures are discussed more fully in Item 7 of our 10-K, and I urge you to read them.

I'd also like to point out that there are slides accompanying today's discussion, which are available on our website and were also furnished on our Form 8-K this morning.

With that said, I'd like to turn the call over to our Chairman and CEO, Larry Downes.

Larry?

Thanks, Dennis, and good morning, everyone.

Going to Slide 4, I'd like to go over the highlights from our very strong quarter.

For those of you who've seen today's earnings release, you know that we recorded net financial earnings, which I will refer you to as NFE, of $1.21 per share for the second quarter, and that compared with $0.91 last year.

And for the 6 months ended March 31, we reported $1.68 versus the $1.51 last year.

We remain confident that we will meet our NFE guidance range of $1.65 to $1.75 per share for fiscal 2017, and we reaffirm that guidance range this morning.

Customer growth was a key driver at New Jersey Natural Gas and NJR Clean Energy Ventures.

Increased utility gross margin from new higher base rates as well as customer additions led New Jersey Natural Gas company's results this quarter.

At CEV, favorable winter weather allowed us to accelerate our residential construction schedule.

In the second quarter, we completed more than 370 residential installation.

As a result, we expect to increase our investment in the Sunlight Advantage residential solar program by about $2 million this year to $37.6 million, and that will compare with $34.3 million that we spent in fiscal 2016.

We also reached several milestones on our key infrastructure projects.

On February 24, the New Jersey Department of Environmental Protection approved critical permits for our Southern Reliability Link.

In addition, shortly after the end of the quarter, PennEast received final approval from the FERC of its environmental impact statement.

The Pennsylvania Department of Environmental Protection also issued PennEast water permit.

These were important steps forward.

And finally, we continue to expand our commercial solar portfolio, our project in Pemberton, New Jersey is on schedule and we expect to complete it this summer.

Three other commercial solar projects will be completed by the end of the fiscal year.

And taken together, the 4 projects will add 24.1 megawatts of clean energy to our CEV portfolio by year-end.

Pat will provide additional retails related to these items during his portion of the call.

Moving to Slide 5. I'll provide a breakdown of the NFE contributions that we currently expect from each of our businesses.

As you can see, New Jersey Natural Gas will continue to provide the majority of our earnings at fiscal 2017.

And as I noted, NJNG will have a strong year due to new higher base rates as well as higher utility gross margin from customer growth.

We anticipate that NJR Midstream will contribute between 5% and 10% of NFE this year.

When you combine our regulated businesses, NJNG and NJR Midstream, they currently expect to contribute 65% to 75% of NFE in fiscal 2017.

The CEV will strategically invest in residential and commercial solar and onshore wind projects, and we expect CEV to contribute between 15% and 25% of NFE this year.

And finally, we expect NJRES to contribute between 5% and 15% of NFE this year.

As you can see, our long-term average NFE growth target remains at 5% to 9%.

Now let's move to Slide 6. Earlier this year, we increased our dividend by 6.3%, and that represented the 23rd increase in the last 21 years.

Our dividend strategy is focused on providing an annual growth rate of 6% to 8%, while maintaining a payout ratio of 60% to 65%, which will ensure proper earnings retention to support future NFE growth.

We believe that our annual dividend growth objectives and our track record of increases compares very favorably with our peers.

And with that, I'm now going to turn the call over to Pat, and he's going to share some details on our second quarter results.

Pat?

Thanks, Larry, and good morning, everyone.

I'd like to begin on Slide 7. This morning, we reported second quarter NFE of $104.1 million or $1.21 per share compared with $77.9 million or $0.91 per share last year.

For the 6 months ended March 31, we reported NFE of $144.5 million or $1.68 per share versus $129.2 million or $1.51 per share last year.

As expected, NJNG was the main driver of our improved performance for both periods.

That said, all our business segments, with the exception of NJR Resources, performed better than the prior year.

Turning to Slide 8. You can see the impact from new base rates and customer growth of NJNG, which accounted for the largest changes in both periods.

This was consistent with our expectations for the quarter.

We also recognized additional SREC revenue and tax credits at CEV, which will result to more SRECs and higher prices from our operating solar assets, investment tax credits from the expected solar asset addition this year and additional production tax credits from our Alexander and Ringer Hill Wind Farm.

We saw lower performance from NJR Energy Services, but, as Larry said earlier, we are maintaining our NFE guidance range for fiscal 2017 at 5% to 15%.

During the second quarter, the PennEast project, of which NJR Midstream is a 20% owner, recognized allowance for funds used during construction, or AFUDC, of about $2.4 million or $0.03 per share in the quarter.

This reflected accumulative adjustment based on our total capital spending to date on the project.

We also closed on the sale of a building owned by CR&R and recognized a net gain of approximately $1.1 million or out $0.01 of NFEPS.

This sale, which was underway last year, was factored to our earnings guidance for fiscal 2017.

Additionally, we sold some available-for-sale securities, which resulted in a net gain of approximately $1.6 million or about $0.02 per share.

Slide 9 shows the bridge from fiscal 2016 actual NFE for the midpoint of our fiscal 2017 NFE guidance range.

As you can see, the largest increase will come from NJNG.

Utility gross margin is expected to be up by about $0.25 per share, mainly due to the effects of the base rate case and customer growth.

And after offsetting the utility gross margin, higher expenses and lower BGSS margin, we expect NJNG to provide a 10% to 15% increase in its NFE year-over-year.

Positive contribution should come from CEV, anchored mainly by increase in asset revenue.

NJR Energy Services contribution, while performing within the guidance range, will be about $0.13 per share lower.

This winter, although colder than the prior year, was still warmer than initially predicted and impacted the value of certain storage and transportation assets in our portfolio, resulting in lower results year-over-year.

This low results will partially offset by the aforementioned sale of available-for-sale securities.

NJR Midstream, with the addition of the AFUDC I previously discussed, had seen an estimated $0.05 increase year-over-year.

Let me emphasize though, any AFUDC contributions beyond fiscal 2017 to be included in NJR's guidance for future years, will be taken into account in our overall assumptions and estimates when we give that guidance.

Therefore, they should not be used as incremental to our average annual growth rate of 5% to 9%.

Slide 10 shows our capital spending update for NJNG for the second quarter and for 6 months of fiscal 2017.

There are 2 items I want to highlight.

Our SAFE II program is well underway, as we have invested $15.3 million in the first 6 months of fiscal 2017 to replace 31 miles of unprotected steel pipe.

As part of this program, NJNG will earn AFUDC on its invested capital during construction and will request rate increases for $157.5 million of safety spending in annual filings.

As a condition of approval, the JV is required to file a base rate case no later than November 2019.

The other item is our NJ RISE program.

To date, NJNG has installed nearly 7,900 excess flow valves in storm-prone areas of our service area.

These valves will strict the flow of natural gas when there's a change in pressure on the service line.

The secondary feed in the Sea Bright in Monmouth County was completed in April, and the redesign of Ship Bottom regulator station on Long Beach Island is underway and is expected to be operational in June of 2017.

The remaining 4 projects are in the design and/or permitting phases, with all projects scheduled for completion by fiscal 2019.

Turning to Slide 11.

Our customer growth remained strong.

In the 6 months ended March 31, we added 4,130 new customers, a 13% increase over last year.

We believe we will add about 9,000 new and conversion customers in fiscal 2017, which is up from the 8,300 previously estimated, with an anticipated utility gross margin contribution of $5.2 million annually.

The increase is due to the inclusion of Superstorm Sandy-affected customers, which should have service reconnected within this fiscal year as new customers.

In total, we expect to spend between $100 million and $110 million between fiscal 2017 and 2019 and add 26,000 to 28,000 new customers, representing a growth rate of 1.7%, up slightly from our previous estimate of 1.6%.

About 55% of that growth will come from new construction and 45% from conversions to natural gas from other fuel sources.

Turning to our Clean Energy segment.

You can see our capital spending and project status on Slide 12.

Although we did not place any commercial projects in this service during the quarter, CEV has 4 solar projects under construction in New Jersey, representing a total investment of $56 million, with an aggregate installed capacity of 24.1 megawatts.

By the end of fiscal 2017, our commercial solar portfolio is expected to total approximately 130 megawatts.

As Larry alluded to, the warm weather allows us to add residential customers at a greater pace than planned.

As a result, we expect to invest about $2 million of additional capital, above our original plan, in the Sunlight Advantage program, for a total of nearly $38 million.

We added 688 residential customers during the first 6 months of fiscal 2017, totaling 6.3 megawatts of capacity, more than double the 291 customers and 2.5 megawatts of capacity added during the comparable period in fiscal 2016.

We now have nearly 5,800 homeowners who have taken advantage of our program.

From a wind project perspective, the completion of our Ringer Hill Wind Farm in December fulfilled our capital spending for the full fiscal year.

As we've discussed in the past and at length during our November 17 Analyst Day, there's a direct relationship between SREC pricing and the timing of the BGS auction.

This relationship is expressed in the chart on the left of Slide 13.

Ahead of February's BGS auction, SREC prices for all energy years increased.

In particular, energy year 2019 increased by 42% compared with the market prices we shared with you on November 17.

As such and consistent with our strategy, we used these market conditions as an opportunity to actively hedge our SRECs during that time frame.

As a result, you can see on the chart on the right that nearly all of our SREC sales from facilities that are currently operational and under construction are hedged for energy years 2017 and 2018.

And more than 3 quarters of our SREC sales are now hedged for energy year 2019, which is significantly up from last fall.

Slide 14 brings together our capital plan for NJR for the next 3 years.

As you can see, our investment in NJNG approximate $703 million over the next 3 years, which equates to rate-based growth of about 6% annually.

With no material changes to the plan at this time, other than the estimated $2 million increase in residential solar spending this year, we'll continue to update you on our plan as the year progresses.

Moving to Slide 15.

You can see that our capital plan is anchored by strong cash flows from operations as well as equity from our dividend reinvestment program.

We plan to issue approximately $162 million of equity over our fiscal 2017 to 2019 planning period.

This is down from the $200 million that we had previously discussed due primarily to the timing of capital expenditures associated with our SRL project.

We believe our cash flows and financing plans will continue to support our strong financial profile now and in the future.

I'll now turn the call back to Larry for some final thoughts.

Thanks, Pat.

And before I open up the call for questions, I wanted to take just a few minutes to review our strategy to create long-term value for our share owners, which we've outlined on Slide 16.

Our value proposition begins with a solid utility platform, with above average customer growth that should add more than $5 million in incremental utility gross margin each year.

In addition, our strong and supportive regulatory relationships have allowed us to receive approval for over $600 million of accelerated infrastructure project to date.

Those projects are benefiting our customers through safe reliable service.

To create additional value, we invest in nonregulated diversified energy infrastructure projects that are aligned with our investment criteria.

These investments are allowing us to capitalize on opportunities to serve customer demand by investing in midstream infrastructure projects, like PennEast as well as solar and onshore wind projects.

Our energy services segment serves the wholesale market, generating net financial earnings that can be reinvested into our capital programs, thereby reducing our external equity needs.

And all of our investments are supported by a disciplined capital allocation process that's focused on maintaining a strong financial profile that will provide access to external capital as we needed at appropriate rates.

Turning to Slide 17.

You can see the 3 segments that are our foundation of our growth strategy: natural gas; clean energy; and energy efficiency.

Our strategy is built around the ongoing transition in our nation's energy landscape.

Increased demand for natural gases due to several factors, abundant natural gas supplies in the Marcellus and Utica fields and across the country have driven prices to historical lows.

And as more and more coal-fired electric plants are retired, natural gas has become the fuel of choice for electric generation.

For us, this means more potential opportunities in the midstream market; and for our core utility customers, they're benefiting from lower prices at their homes and businesses.

Customer demand and public policy goals to use clean energy are driving growth in solar and onshore wind.

Together, these forces are providing attractive infrastructure investment opportunities for us, primarily in the natural gas space as well as in clean energy and energy efficiency.

Now when you think about energy efficiency, the value is clear, using less energy is the best way to improve the environment, and both customers and investors benefit.

New Jersey Natural Gas is a leader in New Jersey, developing programs that support the state's policy focused on energy efficiency by rewarding customers who use less energy and providing substantial savings.

Consider this, our typical residential customers' heat usage has declined by more than 10% since we started this program in 2006.

In addition to that, our customers have saved almost $370 million low usage.

And at the same time, our Conservation Incentive Program, which we refer to as CIP, has protected over $169 million of utility gross margin.

We've also invested about $144 million in our SAVEGREEN program, which has made energy efficiency upgrades more affordable for our customers.

When you think of it together, both the CIP and SAVEGREEN have earned approximately $1.37 per share for our share owners.

And as we look to the future, we believe that there will be regulated opportunities with energy efficiency.

On the unregulated energy side, we're currently studying how innovative products, like battery storage for solar and wind and models to manage energy needs at the retail level, can enhance our offerings to customers.

Now before we go to questions, as always, I just want to say thank you to the outstanding work of our more than 1,000 employees.

These dedicated women and men are the foundation of our company.

They give the best they can every single day.

And as a result of that, they're the driving force between everything we do.

So I want to thank you all for joining us today, and we welcome your questions and comments.

(Operator Instructions) First question today comes from Spencer Joyce with Hilliard Lyons.

Pat, maybe start with you for a second.

Can you talk a little bit about the energy year 2019?

While we see a bit of a drop off in SREC price there, is there anything structural that you see happening a couple of years out?

Or is that just sort of how the market functions there with that type of forward curve?

Well, Spencer, I think there's a couple of things you need to consider.

The first is that the SACP, which is the penalty rate that LSEs have to pay if they do not procure SRECs, gradually declines over time.

And so you'd natural expect a decline in SREC prices as you go further on the energy year curve.

But I think it's more tied to market fundamentals.

As we've discussed at the November 17 Analyst Day, energy year '19 is only about 1/3 of supply in the marketplace, but it's looking for SRECs currently.

So we think that's what really drives the disconnect between energy year '17 and '19 prices.

Okay.

Yes, that's helpful.

It's been a while since I looked at that SACP chart.

I guess, similarly, can you clarify or jump back to Slide 15 on the equity needs?

I may have just missed it.

Did you mention any discrete dollar amounts kind of in '17, '18, '19?

My prior note here was $50 million, $150 million, and clearly, we've come off from those levels.

But did you do give kind of an approximate figure for that '18 and '19 equity?

,

Yes.

Actually, we did, and the appendix of our slide presentation this morning provided those numbers.

For your reference, for fiscal year '17, it's $50 million of equity; for '18, it's $100 million; and in '19, it's about $50 million of equity use.

And that includes the issuance under our grid.

Okay, perfect.

Got you.

Another just kind of small modeling point.

The available for sale gains and the small real estate item, on the income statement, are they under the other income line?

Is that right?

So the available for -- sorry, the available-for-sale securities you'll see flow through other income, Spencer.

And we provided some additional information in the 10-Q in Note 2 on those sales.

And the 10-Q, we filed later today.

The gain on the sale of the property will actually roll up into O&M in the home services and other segment.

Okay.

Very helpful.

I kind of hate to ask this question.

It may be a dumb question, but as much ITC as we saw in the second quarter, from an NFE perspective, is it possible we could see a negative adjustment in the fiscal Q3 and Q4?

I'm trying to think back, I don't think we've ever seen that.

But I'm just trying to back into the full year, given the CapEx level.

And it seems like the ITC log thus far is really kind of bumping up against what we'll probably see for the full year.

Spencer, for modeling purposes, I think it's fair to say, because we have to estimate our annual effective tax rate and take into consideration those ITCs, that it's not likely we'll see a negative.

But you're right in that there is a disconnect between the amount of ITCs recognized and the projects we placed in the service.

So...

Okay, perfect.

That's very helpful.

I guess, last one for me, just from kind of a high-level operationally.

Is it safe to say, kind of across the businesses, we're at a fairly clean year?

I know energy services has kind of rightsized itself from a contribution standpoint over the last couple of years.

And even a year ago, we were kind of looking forward to the rate case, but to me, it just feels like we're kind of progressing through what's a nice, clean, kind of normal year, if you will.

Any thoughts around that sentiment?

Spencer, I think that's a fair statement in terms of business initiatives and the overall business mix.

It's a fairly clean year.

Our next question today comes from Mark Levin with Seaport Global.

My questions are actually more big picture for Larry.

Larry, how do you think about the M&A environment for LDCs in 2017?

And I guess, that relates, just big picture, how tax reform or potential tax reform might impact the pace or the speed with which we've been seeing these deals over the last couple of years?

I think, first thing, Mark, is I can't comment on it specifically as it relates to us, which you're looking at.

The -- what we've seen, the high-level details that we've seen on the tax side so far, hard to draw any conclusion there.

But Pat, you may want to add some things to that as well.

Sure.

Mark, I think the only thing I would add is probably what you read, the press as well, is that with the specter of tax reform and uncertainty around tax -- sorry, interest deductibility, that may impact certain plans.

But beyond that, I got no additional information to share.

All right.

Well, let me...

Yes.

We need more specifics on it, would be the bottom line there, Mark.

Yes.

And as you look at the -- and I know you sort of dovetails into the next question, which is almost impossible to answer, I suppose, without having more specifics.

But generally speaking, when you think about tax reform and the potential impact of maybe lowering the corporate tax rate and some of the other larger items that are being bandied about, how do you think that?

Is that a neutral impact to NJR as you see it now?

A negative?

A positive?

I realize the devil is in the details, but just as things look today, what conclusion, if any, can you draw?

So Mark, we have included in the appendix of our slides something that I'll walk through for you.

I think you have to look at it very much for us from a segment perspective and will vary differently across the utilities.

So for New Jersey Natural Gas, because there's precedent here, I guess going all the way back to 1986, we would expect that any tax reform would be net neutral.

Benefits would have to flow right back to rate payers.

I would add, that's with the exception of our BGSS incentives, which, in a lower tax rate environment, we'd see a higher EPS contribution from the BGSS incentives.

Turning to our nonregulated businesses, obviously, on an after-tax basis, the EPS there would be expected to increase in a lower tax environment.

And the other item here is that we do have significant deferred tax liabilities associated with clean energy, and that's a result of the disconnect between the depreciation period for book purposes, which is between 20 and 30 years.

And for tax, which could be 100% bonus or 5-year makers, depending upon the year you're talking about.

We'll have to revalue that deferred tax liability that will result in a significant onetime benefit.

But all that being said, a lower tax rate environment a 100% in CapEx expensing, it would take us longer to realize the economic benefits of the investment tax credits and production tax credits that we're generating and that could potentially impact the project returns.

And so we'd have to take a look at that as well.

Yes.

That's fair.

I appreciate the detailed answer.

That's helpful.

And then just finally, when you think about moving away from M&A and maybe just talking about asset acquisition opportunities as you look forward, are there -- obviously, you guys have been active on the wind side, reasonable maybe to assume over the next several years, maybe one wind farm per year.

And are you seeing any additional or incremental opportunities in the midstream business, stuff that would meet that profile?

And how are seller expectations or how does pricing look on that side?

Mark, yes.

We were certainly opportunistically evaluating midstream projects at a time, and when we get to a point we got something, we would share that.

But I don't -- I wouldn't say that the landscape is changed dramatically for us.

We have the COO of our [nonrenewable] business is here, Steve Westhoven.

So I'll ask him to add any color or commentary.

I think that's a good way to answer that question.

Yes.

Perfect.

I was just curious if you felt like the market was vibrant right now or right for -- I mean, are you seeing opportunities out there?

Or is this something where the solar expectations are at a certain point that would make it difficult to transact?

Mark, I would just probably repeat what Pat just said.

We're looking at assets.

And certainly, if we come up with something, we'll certainly share it with you.

But we have nothing to share at this point in time.

Mark, it's Larry.

One other quick point.

In the past, as you know, there's been a lot of dollars chasing those types of investments, which have driven down the returns.

And as we've said, we'd not been willing to compromise our cost of capital guideline, the returned guidelines we have.

So...

Yes.

No, that's exactly what I was after, because I remember, Larry, you saying that in the past, and that's why I was just curious if things had changed on that front because I do remember that being sort of part of the fabric before.

Yes, that is absolutely not.

Those criteria have not changed.

Next question today comes from Brian Russo with Ladenburg Thalmann.

Just the fiscal second quarter results increased nearly $0.30, yet on Slide 9, which is very helpful, the earnings waterfall year-over-year, full year earnings only increased $0.09.

And I'm just curious, I know there's the seasonality in the business, obviously, but I was just trying to -- if you could just kind of reconcile that delta.

The biggest piece of that, Brian, would be New Jersey Natural Gas, which, on a -- for the first 6 months of the year, earned about 67% of utility gross margin.

In the second quarter, that's 42%.

And that's really the impact of the base rate case coming through in the second fiscal quarter as compared to fiscal year-to-date.

So that really is what drives the disconnect.

Got it.

And I apologize if you talked about this earlier, but the Clean Energy Ventures NFE practically doubled in 2Q.

Yet, on Slide 9, you're only showing $0.02 of year-over-year full year EPS impact.

And I'm just curious, I know there's tax credit recognition and maybe your front loaded some SREC sales.

But maybe you could just add some color to that.

The main driver there, Brian, is the tax credit recognition.

Based on the accounting rules, we can recognize those ITCs on a slightly different basis than when the projects were actually placed in the service.

And it have to do with estimating our annual effective tax rate and then, for lack of better words, smoothen that out over time.

Okay.

Got it.

And did the equity needs -- through '17 and '18, do they change from prior disclosures?

Not from the first fiscal quarter, but they did change from our year-end Analyst Day, but modestly.

They decreased by about $38 million.

Okay.

Got it.

And then, the 2,000 -- the slide on the hedge -- SREC hedge levels and pricing, the 2019 average hedge price has come down fairly significantly as well as the current price.

And I was just wondering if you could elaborate on that.

Brian, I think the -- it is true that the market prices have come down a little bit from the first fiscal quarter there in a range of $1.55 to $1.60, still higher than year-end.

The hedge price, I don't recall if those have changed that materially from any other prior materials that we've put out, whether on the Analyst Day or not.

So we think the -- I'll check and so we'll go back to you.

Yes.

Okay, great.

And then, I didn't see any slide on PennEast.

I was wondering if you could provide an update on that.

Sure.

PennEast, as Larry has said during his narrative, that they received their final environmental impact statement on April 7, and then next step in that process is to receive our final FERC certificate, which is supposed to come in 90 days.

We're certainly waiting for a quorum to be established at FERC in order to receive that certificate, but that's the next step in the process.

So we're moving forward.

And hopefully, that project will reach another milestone here in the next few months.

(Operator Instructions) Our next question comes from Travis Miller with MorningStar.

So on the gas distribution side, you guys obviously had a lot of success on the conversions.

Can you give me a sense for what that addressable market is at this point in terms of future potential conversion customers?

Yes.

Sure, Travis.

This is Pat Migliaccio.

When looking at -- we've got a pie chart in the appendix section that shows the total addressable market.

If you look at a slice of that pie chart that we refer to as On Main, which are the customers that are right near our distribution system, there's approximately an 8 to 9 year supply of those customers without much in the way of incremental CapEx.

And then if you look more broadly across the entire market segment, we have over 100,000 potential conversion customers, which, at a pace ramp, would imply a 22 to 24 year supply.

Okay.

So what would have to change, apart from just natural gas prices, what are some of the key factors that would change that addressable market, just on an economic basis?

And again, obviously, gas price changes will have an effect, but is there anything else that would change that market opportunity?

Travis, I'm going to ask Tom Massaro, who is our SVP of Customer Service and Marketing, to address that question.

Travis, the fluctuation year-over-year, and you hit on one of the drivers that could be the differential between oil and natural gas prices, the majority of those conversion customers are coming from fuel oil.

So we saw a greater spread between fuel oil and natural gas.

And weather, obviously, also impact that, and colder than normal winter that will have folks running right through more fuel oil most likely on higher prices because of the demand for the oil.

But the fluctuation between that wouldn't bring you much quicker than the 22- to 24-year supply that Pat referenced.

It might move it up a couple of years, but the fluctuation in conversion numbers, it's been pretty steady.

Okay.

So that's why you're primarily hearing from customers is we just want cheaper fuel or something.

It is definitely driven by economics for the conversion.

And at this time, we are currently showing no further questions.

I would like to turn the conference back over to Dennis Puma for any closing remarks.

Okay.

Thank you, Ryan.

I just want to thank everybody for joining us this morning.

As a reminder, the recording of this call is available for a reply on our website.

As always, we appreciate your interest and investment in New Jersey Resources.

Enjoy the rest of your day.

Thanks.

Goodbye.

Ladies and gentlemen, the conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.